Children today receive £4.43 a week in pocket money on average. That’s enough to buy around five Mars bars from Sainsbury’s – one for each weekday – or a small packet of pens from WH Smith. But how much further could it go in a junior ISA?
Our ISA guide explains the basics of what an individual savings account is, plus how junior ISAs work for children. But how effective is a junior ISA as a savings and investment vehicle, and is it worth the battle of persuading your child to curb their spending habit?
Although £4.43 a week might seem like small change, analysis from mutual society Shepherds Friendly suggests a child could generate £4,115 in a junior ISA by age 18 if they save this small amount of pocket money every week between the ages of 6 and 18.
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If parents provide a helping hand and top this amount up to £10 a week, instead starting from their child’s birth, they could amass £12,392 by their eighteenth birthday. This could go towards living costs while at university, or contribute to a deposit for a first home.
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These calculations assume the money has been saved in a cash ISA with an interest rate of 4.6% AER. It is worth pointing out that interest rates are currently at a high level, although they are expected to fall throughout the course of 2025.
Savers might struggle to match this return in a cash ISA once rates start to come down, but investing the money in a stocks and shares ISA could deliver superior results over the long term.
Cash versus stocks and shares junior ISA
A well-diversified portfolio of stocks and shares will almost always beat cash returns over the long term, as we explore in our piece on saving versus investing. You just need a long enough investment horizon. A minimum of five years is generally recommended, but the longer the better.
Based on information we plugged into Hargreaves Lansdown’s investment calculator, investing £10 per week (£40 per month) over a period of 18 years could leave your child with a pot worth £13,866, assuming 5% annual investment growth.
Based on these assumptions, you would have contributed £8,640 in savings, and the junior ISA would have generated £5,226 in capital gains.
For context, the FTSE 100 index has delivered an annualised return of just over 6% over the past five years. Over the same period, the MSCI World has delivered an annualised return of almost 13%, while the S&P 500 has delivered almost 16%.
With this in mind, an assumption of 5% annual investment growth could be on the conservative side. A lot depends on the funds you choose for your child’s junior ISA and the level of investment risk you decide to take.
How do junior ISAs work?
A junior ISA is a tax-efficient wrapper for saving and investing on behalf of a child. You can stash up to £9,000 away each year, holding it in cash or investing it in the stock market. Any income and capital gains are shielded from the taxman.
A junior ISA legally belongs to the child – so it won’t eat into your £20,000 ISA allowance each tax year (the limit for adults).
With a junior ISA, your child will be able to access the account as soon as they turn 18. This means there is nothing stopping them from spending the money, even if you would prefer them to keep it invested.
If you do decide to open a junior ISA for your child, persuading them to save some of their pocket money into it each month could be a good lesson about money.
“By instilling the values of saving up and budgeting early on, we can equip children with the essential skills to navigate financial challenges as adults,” says Graham Drummond, head of communications at Shepherds Friendly. “Not only does this help to empower them to make informed decisions, but it also encourages a sense of responsibility and self-discipline.”
If you are weighing up which investment platform to use, see our round-up of the best junior stocks and shares ISAs. This looks at a range of factors, including fees, industry awards and customer service.
